This can be seen by looking at IG Client Sentiment (IGCS), which tends to be a contrarian indicator, especially in trending markets. In recent days, it seems retail traders have been increasing their downside exposure in gold and silver. Is this a sign that further gains might be in store?
Gold Sentiment Outlook – Bullish
The IGCS gauge shows that about 58% of retail traders are net-long gold. Since most of them are biased to the upside, this hints that prices may fall down the road. But downside exposure increased by 11.66% and 10.04% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure hint that prices may soon resume higher.
XAU/USD Daily Chart
On the daily chart, gold broke under the 20-day Simple Moving Average (SMA). This followed the emergence of a Bearish Engulfing candlestick pattern, increasingly opening the door to extending downside progress. But, confirmation of the 20-day SMA breakout is lacking after the midpoint of the Fibonacci extension at 1977 held. This is maintaining the near-term upside bias. Extending lower exposes the 100-day SMA.
Silver Sentiment Outlook – Bullish
The IGCS gauge reveals that 51% of retail traders are net-long silver. Since traders are net-long, this hints price may keep falling. But, net-short exposure has increased by 7.87% and 171.66% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure warn that the current price trend may soon reverse higher.
XAG/USD Daily Chart
Silver prices also face the downside risk of a Bearish Engulfing candlestick pattern. But, unlike gold, XAG/USD has been unable to break under the 20-day SMA, leaving the precious metal in better technical standing than XAU/USD. Turning higher places the focus on April 2022 highs (25.85 – 26.21). Otherwise, falling under the SMA exposes the 50-day equivalent for key support.